Business

Debt Collection Strategies for the Modern Businessman

It is understandable that you want to focus most of your time in the office on pulling in more paying customers and growing your business, but part of operating a successful business is learning how to collect on debt. If you pay no attention to the customers who are not paying as expected and focus only on those who do pay or new ones you hope will pay, you give up a lot of money that could be used by your business to operate and remain competitive. You cannot afford to just let that money go!

It is understandable that you want to focus most of your time in the office on pulling in more paying customers and growing your business, but part of operating a successful business is learning how to collect on debt. If you pay no attention to the customers who are not paying as expected and focus only on those who do pay or new ones you hope will pay, you give up a lot of money that could be used by your business to operate and remain competitive. You cannot afford to just let that money go!

The first thing you have to do is take the extension of credit to your customers seriously. Do not extend any credit to anyone who is not worthy of it and make sure that those you do qualify have reasonable limits for their lines of credit. You should also have a detailed credit application form which requires customers to give all of their contact information in case you need to contact them at some point. Make sure all information they give you is legitimate.

You don’t want to be a lax collection agent on your own behalf. You need to go after the money you are owed on a routine basis, rather than just tackling this job when you really need money coming in. In order to be effective, you will need some type of system that alerts of overdue debt the moment they become overdue. This allows you to be consistent and start the contacting customers right away. If a manual system seems like too much for your customer base, consider computer software to track this for you.

There are three basic ways that you might go about contacting those who owe you money visiting them in person, calling them, or emailing them. It is common for debtors to ignore letters that come in the mail and many are pretty good at dodging phone calls as well, since they have caller ID. This leaves showing up on their doorstep to question them on the debt as the most effective way to actually get in touch with them.

Make sure that you are polite but firm with the debtors that owe you money. You want to make sure that they do not dispute the money that is owed to you. Then you want to find out the reason for the delay in payment. Perhaps it is because they are in a financial crisis or they are owed money by their customers or clients and are not being paid.

Follow the meeting up with an email or a good letter. You might also include a copy of the bill that is due. This should be done right after you have discussed the debt with the customer.

If you still have not received any monies or responses from the customer/client you will need to send out a legal letter. Legal letters are written by the company’s attorney. A letter from an attorney generally invokes a response from the debtors that honestly owe you the money and are unable to pay then the people that are just trying to avoid making payments.

You may also consider using a debt collection agency, but be careful who you hire. If they use questionable tactics to get the money it will shed a negative light on your business. Most businesses go with an attorney, since they do not want to be caught up in bad press. An attorney is efficient and actually has more authority than an agency anyway.

If you’re owed money, consider hiring a collection law firm to help you recover your money. Debt collection lawyers typically only charge a fee when they recover the money you’re owed.